Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to <unk> days branch pretty reports fourth quarter and full year 2019 financial results and operational highlights conference call. At this time all participants are in the listen only mode. After just speak your presentation, there will be a quest.
And then answer recession to ask a question during the session you will need to press star one.
Alan I must advise <unk>. This conference is being recorded today Monday display third go from March 2020, I would now like to hide the corn French over here first speaker today, Bob Good team. Thank you. Please go ahead Sir.
Hi, good morning, an afternoon could ever run.
I'd like to welcome all of your <unk> brings wave limited fourth quarter and for your conference call with us today, or Chris Foreign Jaco, Chief Executive Officer, and hard to our VP Chief Financial Officer.
It will provide an overview of the company's business activities and developments for the fourth quarter.
Well, then open up the call for questions and answers.
Right turn over the call Huh.
Like reminds me that this conference call, including both management's prepared remarks.
Question answer session mean, and paying projections and other forward looking statements regarding future events for the future performance or plans way.
Including but not limited to any statements relating to commercial plans or activities.
Productions clinical studies R&D plans and we're anticipating timelines when used in this call. The words interest could enable us to maybe intend expect but will you potential will should project and similar expressions as they relate to brents way.
Our as such forward looking statement. These statements are only predictions and brands, we cannot guarantee that they will and occur Brunswick does that assume any obligation to update that information.
Investors are cautioned that all forward looking statements.
It may cause actual results to differ from those anticipated by friends away at this time.
Additional risks concerning factors that may cause actual events or results are achievements to materially differ from those contain.
Forward looking statements can be found on the Companys registration statement on form F. One and it's other filings with Securities and Exchange Commission.
Today, the company issued a press release announcing the financial results for Q4 in full year 2019. So.
This call who they have not done so can find this release on brands was web site as we provide summary of the results on this call.
Those remarks I'd like to now my pleasure turn the call over to bring sway CEO.
Chris Bowden Jaco Chris.
Thank you Bob.
Welcome everyone. If your brain waves fourth quarter and full year 29.
Earnings call.
As you know I stepped into the role of CEO in January of this year, although I had the opportunity to introduce myself on our third quarter earnings call last November.
Today I'd like to provide you with an overview how I spent my first 80 days the CEO as well as by initial impressions of brands way.
I'll turn the call overtime Dart Levy.
Chief Financial officer to discuss our financial results after.
I'll, then conclude by highlighting our R&D efforts and clinical trial activities as well as other key focus areas for Twentytwenty.
With that let me begin by briefly reviewing my first few months as CEO over this period I've spent a significant amount of time listening to our key stakeholders, including customers key opinion leaders, our sales and development teams and investors.
Quite simply these interactions have left me, even more energized and optimistic about our future potential than it already was we have developed some great relationships with our current customer base and we had a clear opportunity to grow with these existing customers and expand with new customers.
From a technology standpoint, we have a safe and effective product that has well differentiated technology to serve multiple very large markets of underserved patients importantly, we're not only focused on the growth of our technology for major depressive disorder, or NBD, which itself represents a target market.
Of over 17 million patients in the U.S., but also for obsessive compulsive disorder or O C D, which affects over 2 million patients.
In the U.S. alone.
Moreover, we have a robust pipeline of other psychiatric neurological and addiction disorders.
I would now like to briefly discuss the krona virus, which is causing meaningful complications to daily life and business operations for us all.
Our primary concern is for the health and safety of our customers their patients our employees and their families.
We are following all CDC guidelines to help combat. This global health endemic of course, these are challenging times and we recognize the importance of patients continuing to receive their deep CMS treatment.
Therefore brands way remains fully operational and dedicated to serving customers the best of our ability.
With investors because travel has been severely limited we're now operating in a virtual virtual worlds.
With that said, we had been aggressively telling our story to investors and are continuing to build relationships that will serve us well.
In fact, I recently conducted conference calls with investors around two large healthcare investment bank sponsored meetings.
We will continue to conduct virtual meetings with investors over the coming months in order to share our company. It is differentiated technology and value proposition.
As I mentioned, our deep CMS.
System has demonstrated clinical efficacy in MDD, no CD and as well tolerated of significance, our FDA clearance at both MDD endosee, they provide us with substantial competitive advantage in the marketplace.
Customers can treat both sets of patients with our platform technology, while other Tms technologies can only treat MDD patients.
With this we have a unique opportunity to create a medical device leader in the non invasive brain disorder treatments space. We have a proven track record of sales execution continued to focus on the science to improve our technology and conduct clinical trials to potentially expand into new indications.
In addition, we have a strong balance sheet with the necessary resources to support our growth plans as well as a talented and dedicated employee base.
We delivered very solid results in the fourth quarter and full year 2019.
Moreover, I'm proud to report that we installed our 500 system in the fourth quarter.
We now have treated over 550000 patients and delivered over 1 million treatments with our deep Tms system.
We also delivered positive result in multiple clinical studies, which I will discuss further follow had ours review of the financial results.
Before I turn the call over today, our I'd like to briefly discuss the importance of what we do here at brands way every day.
When people think of the.
Costliest major health conditions diseases, such as cancer diabetes, and heart disease always come to mind.
However, the conditions that topped the list our diseases that Unfortunately also has had a long stigma associated with it mental health disorders.
Today's most common treatment options, our various forms of psychiatric medications and therapy.
More and more recently added our and far less common our newest stimulation devices that are implanted into the brain.
For this reason I can hear the excitement in the voices of many psychiatry as I have talked to about brands ways noninvasive deep CMS.
It is clear to me that they view the Tms is there potential game changing option for many people suffering from mental health disorders.
With that.
I'll now pass the call over to Adar for his review our financial results.
Thank you Chris.
We're very pleased with our strong performance in the fourth quarter and throughout the year in 29.
Our positive results reflects the continued increase in demand for all if CMS system.
Let's turn to our gear resolves for the fourth quarter 2019.
We generated the quarterly records revenue of 6.3 million, an increase of 32%, although the fourth quarter of 28.
Our recurring revenue was 3.5 million.
Groups of 25% year over year.
This recurring revenue demonstrate the benefits the brainstorm business model in which a significant portion of <unk> deep CMS customers, New Jersey into a lease arrangement that generates recurring revenue over three to four year period and provides greater stability will fall future growth.
Since year end 28 in branch, where your installed base I was increased by 147 system, reaching a total of 530 deep CMS system.
This December 31st 29 pm and reflecting a quarter over quarter increased 42 systems.
At year end 2019, the company our chip hundred 73.
Well.
It on elements to certain Braintree, new and existing system since marketing clearance was obtained in August 22.
You want to recall look into third quarter arguments for additional close outpaced our ability to fully satisfy all the orders we received.
How do we expect that this additional demands was from show in the fourth quarter.
I should add that we continue to walk through a pen reimbursement into your for obesity treatment.
Well I want to review our financial results in greater detail. Shortly you will note and increasing our operating expenses year over year in the fourth quarter and for the full year of 29.
This is primarily due to the investment we're making into future growth of our business one of the key objectives that we said when we six is successfully completed our U.S. IPO last year.
We out of the net of six new.
Professional in 2019, ending the year with 18 total sales professional into yours.
We intend to other approximately six new sales professionals in 2020.
As a reminder, thank you Paul for our strategy is that we intend to execute the phone our growth strategy by continuing to either.
In our sales and marketing activities globally.
Well, we are a through into the short term challenges in this difficult period, we remain confident that this investment will help drive long term growth.
No I would like to provide a detailed review financial performance in the fourth quarter of 29.
I discussed our strong topline results earlier.
I'll now review our profitability metrics.
Gross profit for the fourth quarter of 2019 was 4.9 media and increase of 32% from 3.7 million during the prior year period.
Gross margin for the fourth quarter of 2019 was 77% the same of the prior year period.
Research and development expenses for the quarter were 1.8 million similar to the same period in 2018 and primarily consisted of the continued development.
Pms technology, including finalizing the smoking cessation, Bobby conducting clinical trials for treatment of PTSD and other disorders.
Sales and marketing expenses for the fourth quarter of 2019 was 3.6 medium.
Greece of 1.1 million over the prior year.
Increase was mainly driven by enhanced marketing activities.
Nvidia No study.
And a larger number of sales professionals compared to 22.
General and administrative expenses for the quarter were 1.4 million as compared to 1.1 media in the prior year period.
This increase was driven by additional cost associated with all cones thoughtless other public company in the yours, and then increasing noncash provision for doubtful debts.
Total operating expenses for the fourth quarter totaled 6.8 million compared to 5.4 million a year ago.
For the fourth quarter ended December 31st 2019, we incurred a net loss of 2.3 million compared to 2.1 million recorded in the fourth quarter of 22.
For the full year of 29 thing, we're proud of our strong growth in revenue and system.
In 29, then we reported revenue of 23.1 billion, an increase of 41% overall revenue of 16.4 million in 23.
Recurring revenue were 13.3 medium increase of 38, we spent over 22.
In 2019, we incurred a net loss of 10.4 million compared to 6.5 from here in the prior year as we increase both sales and marketing default and incurred higher expenses other public company.
Moving to the balance sheet, we ended 2019, which had cash cash equivalents of 21.9 million compared to 23.7 million.
As of September Thirtyth 29.
Just use during the fourth quarter was in line with our expectation.
We believe us on a strong balance sheets will allow us.
The time to explain those sales and marketing efforts further to drive additional adoption of the dip message from continued to invest in R&D in order to exploring your potential indication.
We've got Lucky to turn the call over degrees for some further thoughts before we open up the call for questions announcer Chris.
Thanks to dark.
I would like to discuss our ongoing efforts to ramp up our R&D efforts, we have a robust clinical pipeline, including studies in multiple potential indications for de Tms beyond our FDA cleared treatments for MDD CD.
During the fourth quarter, we announced final positive results from our multicenter smoking cessation study.
Data from this large randomized pivotal study demonstrated that our deep Tms can potentially play an important role in helping cigarette smokers, who seek to quit.
Within the next few weeks, we intend to submit a five 10-K application to the FDA for this expanded indication.
We expect to regulatory decision from the FDA and our submission within the next 12 months.
Importantly, our preparations for this due in large potential indication are currently underway.
Approximately 38 million us adults smoke cigarettes, and 480000 die from smoking each year. So this is obviously a serious public health issue.
There are limited treatment options that exist today in this area and deep CMS, maybe able to address the significant unmet medical need.
Last month, we also announced positive results from our feasibility study of deep CMS in the treatment of adults with 80 HD results showed a statistically significant improvement in patient reported assessments of and attention.
Together with a significant increase in activity that was observed within the dorsolateral prefrontal cortex, a part of the brain previously shown to have reduced activity in adults with the HD.
These patients currently taking a significant amount of medications.
Some of which carry substantial side effects and the compelling results of the study indicate that deep Tms could potentially provide a non pharmaceutical treatment option.
We're currently evaluating the next steps further.
Further research into this area.
We also recently announced the interim results in our PTSD study.
Unfortunately, deep Tms did not demonstrate sufficient efficacy relative to sham controlled treatments and PTSD patients.
Based on this interim analysis, we will not invest additional resources in order to continue this study.
We are however, performing additional analysis and considering future PTSD studies using alternative parameters.
In opioid abuse. Please recall that brands way was selected by the FDA as part of its innovation challenge and received a breakthrough device designation by the FDA.
We continue to work internally and with FDA in an effort to initiate this study we expect to submit an investigational new device application later this year.
Moving on I would like to highlight the appointment of Abner Lou sheet to our board of directors in February Avner is an accomplished business leader with close to 20 years of experience at the healthcare industry as well as in corporate strategy and finance, we look forward to his continued contributions to our business.
Now to summarize we headaches outstanding 41% growth in year over year revenues driven by demand for a de Tms system.
For 2020 were focused on continued implementation of our growth strategy and target regions in the U.S.
Continued efforts to secure reimbursement froze CD.
Target expansion efforts in U.S. regions, improving our overall operational efficiency.
Executing our play in clinical trials and product development initiatives.
We're also increasing our investor relations outreach and we have a number of investment conferences on the scheduled for the year. We will continue conduct continue meeting with in person and virtually with key investment analysts and institutional investors throughout the year.
With that I will now ask the operator, please turn it over for questions.
Operator thanks.
Thank you Sir and as a reminder, if you wish to ask a question. Please press star one on your telephone.
Your next to cancel your request you may PRASA heskey.
We have here for its questions from the line of Miglucci of Cantor Fitzgerald. Your line is how old are.
Thank you and good morning, thanks for taking the questions.
Let me start with a couple on cobot 19, So I think you guys to have some visibility into the utilization of your systems.
So I wanted to know what kind of impact are you seeing in terms of patients getting treatment.
Or what have you been hearing from from your customers and then also.
Maybe just comments on.
How would the how coping 19 has impacted your you're selling process.
Great. Thanks, a lot I appreciate the question.
Obviously as I said in our opening statements obviously, it's impacting all of us.
We have reached out to a number by our customers some of the large and even smaller customers and we continue to do so for now we see that these are essential treatments.
For these patients and they're continuing to treat.
In a majority of our centers, which which is obviously is great.
I think in general from what we've heard from a number of ours are clinics that they're taking obviously extra precautions.
In addition to that Theyre, obviously, taking additional extra precautions with elderly patients.
So with that.
You also asked a question I think about the Salesforce is that what you didn't sorry.
Yeah, Yeah, just the impact that some of the restrictions are having on on your.
The sales process that you guys are seen.
Yeah, I mean, it really is regional independent right now depending on state to state.
You know, our salespeople are still getting out and having meetings.
But they are doing quite a bit of also a virtual meetings that we've had some really good success over the last two weeks of having virtual meetings and.
It was really nice to hear from a number of the salespeople about that those those are continuing to happen. So I think you know where we're continuing to push forward. Our sales efforts obviously were hampered.
By what's happening, but we're continuing to push forward.
Great that's helpful.
On CD helmet, there were obviously strong in the quarter.
I think you talk specifically about that but just remind us how we should think about the timing of of contribution timing and amount of the contribution than maybe if you can just expand on your thoughts on the reimbursement timing.
So.
Obviously their reimbursement is the key facteau for the usage of.
Also offered the corridor, we do see some or.
Some increase in the usage of deals today.
Right now.
I would say that you know its.
It's not really material, but we.
Very happy to see the increase of usage of Yossi deal with respect to their reimbursement.
People are working very hard to get the reimbursement.
And we hope to.
To get the reimbursement as soon as possible.
Great. Thanks, and last one for me just.
How should we think about cash burn in 2020, maybe relative to 2019, and then I guess, how how do you plan on balancing some of your investments to grow the business versus any any of the near term disruption from co. Good 19.
So Ah yes. Thank you for the question obviously from our part we're looking at things from a cash Conservative you know, we're trying to conserve our cash at the moment in certain places. So we're kind of looking at different from an expense side. We had some open the head count and we're probably pushing those off for a little bit we're looking at other cash.
Cash.
Conserving measures as well.
Great. Thanks for taking the questions guys and congrats on the same congrats for.
Thank you appreciate it.
Thank you. Your next question comes from the line of Jason Bedford from Raymond James and Associates, Inc. Your line is now open.
Good morning, Thanks for taking the questions just a few and not surprisingly there.
Cool 19 related but.
Think about that the current U.S. market or capital decisions still being made.
And would you expect to see more interesting thing the lease model versus the outright sale model.
Yes currently.
Most the favorites small oh no customers is the least more than we can see more and more.
Lease contract that they've been signed.
Specifically due to.
From lots of first financing reason, it's much easier for customers.
The Sun with us the contract over there and to spread out the payment over four years rather than.
Two.
So to buy these.
Missions for full price.
Okay.
From the smoking.
Session, you mentioned, you're going to submit the five to 10-K in the next few weeks.
We expect the decision from an FC area in the next 12 months that's longer than a typical five to 10-K just wondering if this timeline is based on.
Recent discussions with FDA or.
Or your assumption given what's what's going on in the world right now.
Yes. So thanks for the question, yes, it's probably we're trying to be a little bit conservative just what's going on.
In the in the World right now, it's probably you know.
Somewhat on the order about six to 12 months and we're just trying to be a little bit more conservative so were expecting hopefully by the end of this year.
Okay, Okay and just there's.
Nothing in our discussions with the with the FDA.
Okay. Okay.
On your discussions on C.D. reimbursement or those discussions continuing now in this environment just wondering if they're kind of put on hold again, given what's going on.
No. We are we are actively having ongoing discussions both with our consultants on as well as with.
Payers as well so.
Where we are continuing to push forward in a number of different areas within that but as you know.
Complex thing reimbursement and I think we've made some good headway in the last several weeks with some of our thoughts on new strategies.
But those are continuing.
Okay and then.
You may have answered this in the last let a question.
The six reps that you're hoping to higher this year, how many of you hired already.
So we already hired additional tumor cells restaurant during 2020.
Okay.
Thank you.
Okay. Thank you.
Thank you. The next question comes from the line of Steven Lichtman of Oppenheimer <unk> Co., Inc. Your line is now open.
Thank you hi, guys.
I appreciate you mentioned.
A shift to more virtual discussions with physicians and your sales reps. During this time can you expand a little bit more on on how that's working and how broadly that's being deployed across the country.
Yes, good good morning, Stephen Thank you for the question.
Yeah in general we think giving.
Access to our salespeople to set up these virtual calls and ER and sometimes we'll we'll get a sales person and maybe a clinical person or maybe there manager involved in it and the the in general I would believe that I believe that the the the customers. The physicians in this case have been very.
Accepting of that we know that.
Some cases.
Psychiatry has to have been seeing.
There's been an increased amount for patients for them to talk to and they've been actually going to virtual with some of their their patients that are non Tms patients.
So I think they've been very receptive to it and the nice thing about that can do it after hours as well or even before hours on the clinic and in some cases, we've even had some done over the weekend.
Okay got it and Ken can training be done.
For the new for new customers can training be done virtually as well or or is that not possible.
You can do some training, but obviously.
We conduct onsite training for use of the equipment you can do some pre training potentially before youre right. There on site, but you really need to have a.
Technical person one of our one of our engineers to be there on site for the training.
Okay, and then and then just last I know Craig assets early or are you mentioned, obviously the lease option as it has been the most attractive I I apologies if I missed it but are you seeing in in the last several weeks.
A mix shift towards that away from from capital purchases more so given given the current environment.
Okay.
I would say that you know.
It's probably the same rational as we have seen the.
So far.
By the way also folded direct purchase deals we are offering get financing deal.
We suffered body lenders so even if someone wants to buy the machines you can always finalist although the mix that full five years. So that is not the issue all of those in steel we still see the Oh.
The vast majority of our customers prefer the the least mall with Ah.
The full warranty and maintenance and all the services, that's where providing as part of this arrangement.
Okay, great. Thanks, guys.
Thanks, Steven Thank you Steve.
Thank you. The next question is from the line of Jeffrey Cohen Goldenberg Zelman. Your line is now open.
Hi, Chris or how are you.
Great how you doing Jeff.
Just first or one of circle around a little bit further on some of.
Critics questions earlier can you talk about the.
Patient flow as far as or how you think that's doing over the past.
A couple of weeks or a few weeks.
The the officers out there in centers.
That are for open and auto and then any trends are that comparison.
Further information on that front.
Yeah, Jeff. Thank you for the question I think as I mentioned before.
We have reached out we've been very active reaching out to our customers.
We put notice this up we sent out emails to our customers, making sure that they understood how to clean our products and things like that sort of been very very active and our reach out.
From what we hear from most of our customers I would say the majority of our customers continuing to treat and even accepting new patients again.
This is considered by many an essential treatments.
So it's really a medical necessity.
And that's that's the majority of the customers that we've spoken to and again they are have been taking precautions.
Both with the patients coming in look.
Looking at new patients as well there continuing that treatment for the current patients. So I think we are we're very happy that they're continuing these treatments, but again, we're going to continue our ongoing discussions with all of our customers.
Okay got it and then secondly can you talk a little bit about.
Your next steps and perhaps some time lines, so sorry for the clinical work going forward.
Yes. Thank you.
Said in the prepared remarks, we were very excited about the.
About the feasibility results that came out from that.
Obviously, we have a number of things in our clinical pipeline that we're looking at.
And where you're going to continue to kind of reevaluate what the order of these things should be.
As I mentioned that prepared remarks, obviously the opioid.
Study is something that I think it could be a big obviously benefit.
Two potential patients that are out there, but the great thing is the results were very good.
And we're just looking to make sure that we're prioritizing in the in the right levels.
Okay got it could you give a sense of Ah.
The other positive results that were reported what was the average age of the enrollees in the study you would you expect further clinical work to continue longer same lines on the age for or do you expect that.
Higher or lower.
Yeah, I don't I don't have the.
The average age right in front of me, but I think we what I know that we treat it was between 18 and 60, but I don't know what the average age was but I can come back to you on that Jeff specifically.
Okay perfect great, but those are for me thanks for taking the questions.
Thank you Jeff.
Thank you there no further questions at this time Sir.
Okay.
I would like to conclude the call by thanking the board for Entrusting me with the exciting task of continue to grow our business secondly, like to thank our employees for their continued support and commitment which produced another successful quarter and year. Our team is focused on providing hope and improving patients' lives with our game changing products.
With that please enjoy the rest of your day and you could end the call Mel Thanks.
Thanks, very much and that does conclude our conference for today. Thank you for participating you may all disconnect.
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